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Annual Tax Compliance for Section 8 Company

Annual tax compliance for a Section 8 Company involves timely filing of income tax returns, audit reports, and necessary regulatory forms with the MCA and Income Tax Department.
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What is a Section 8 Company?

Not all businesses aim for profitability; many are driven by charitable and non-profit objectives. Such entities are recognized as Section 8 Companies under the Companies Act, 2013. These organizations dedicate their income and profits entirely to their mission, without distributing dividends to shareholders. If you’re looking to support a noble cause with your earnings, Section 8 Company Registration is the ideal choice, as it provides a central license to operate with legitimacy and transparency.

According to the Companies Act and Income Tax Act, every Section 8 Company is required to fulfill specific annual compliance obligations. These include filing of annual returns, maintaining proper financial records, conducting board meetings, and submitting necessary reports to the Registrar of Companies (RoC). Adhering to these compliances enhances the organization’s credibility and helps avoid penalties, ensuring continued support and recognition from stakeholders and regulatory bodies.

Annual Compliances for Section 8 Company Registration

Below are the annual compliances for a section 8 company that needs to be filed accordingly:

Appointment of An Auditor: It is obligatory for firms to appoint an auditor under section 139 of the Company Act 2013. A statutory auditor appointed for a term of five years shall audit the book of accounts and yearly returns of the corporation.

Maintenance of Statutory Registers: As listed in Section 8 of the Companies Act 2013, the company shall maintain a statutory record comprising of its members, loans received and costs established, its directors, etc.

Convening Meeting: Once a year, within six months of the conclusion of the fiscal year, an annual general body meeting must be held, along with additional board meetings.

Boards’ Report: The company’s Board of Directors must file its annual report, which includes all financial data and other annexures, in a timely manner. The board report must be submitted on Form AOC-4.

Preparation of the Company’s Financial Statements: The statutory auditor will prepare the balance sheet, profit and loss account, cash flow statement, and other financial statements for the company, which will be filed with the ROC.

Tax Returns: The ITR must be filed by the 30th of September at the conclusion of each assessment year.

Financial Statements Filing: Within 30 days of the annual general meeting, the financial statement must be filed in the appropriate form (E-FORM AOC-4).

Annual Tax Returns: Within 60 days after the annual general meeting, the annual return, which includes all information such as management and shareholder details, will be filed with the Registrar of Companies (ROC) in Form MGT-7.

After the registration of a Section 8 Company, a firm may be required to execute additional compliance tasks in addition to the list of annual compliances, depending on the situation. These are:

– A corporation that receives gifts or funds from donors is entitled to tax exemptions on those earnings. To qualify for this exemption, the company must meet the requirements of Section 11 and register under Sections 80G and 12A.

– Auditor Appointment should be done within 30 days after the incorporation.

– After the incorporation of a Section 8 Company, it is mandatory to open Company’s Bank Account and deposit initial share capital in the ratio of shareholding mentioned in MOA. The next step is to file the INC-20A form within 180 days of your company incorporation.

Event-Based Compliance for Section 8 Company

In addition to annual compliance for section 8 company that is registered online, non-periodic compliance is also necessary. On the occurrence of certain events, they are filed. They are:

1- Directors’ appointment or resignation;

2- Auditor’s appointment or retirement;

3- Share transfer;

4- KPM (Key Managerial Personnel) appointment;

5- Receipt of the money for the share application;

6- Change of Company’s name;

7- Amendment of the MOA (Memorandum of Association) of the company;

8- Change in the registered address of the company;

9- Any modifications to the structure of the company, etc.

Benefits of Annual Compliance for Section 8 Company:

The primary motive behind compliance for Section 8 company registration is the avoidance of penalties. It also ensures that the organization functions properly. Some of the points stated below are:

Transparency of Operations

Financial compliances, such as the preparation and filing of financial filings and yearly returns, provide a comprehensive picture of the company’s financial status. As a result, reporting the company’s compliances creates transparency in the company’s operation or current state.

Enhancing the company’s credibility

Companies that file their compliances on time have a higher level of credibility than those that do not. As a result, such businesses can easily obtain financial assistance and market credit from the relevant authority.

Avoid any legal difficulties

If a company fails to comply with the requirements, it may get caught in legal matters, such as receiving notification from the MCA, which can lead you to legal problems. It is always advisable to comply in good time in order to prevent further legal issues.

Building client confidence

Everyone trusts organizations that file compliances on time and are transparent about their financial details, whether it’s a client, a vendor, a supplier, or a regulatory authority. Such businesses have a higher level of credibility, making it easier to get trust from the general public.

To prevent penalties

Finally, avoiding penalties is the most important reason for filing compliances on time. Noncompliance can result in a number of negative outcomes, including the closing of a business, the confiscation of a license, or the imposition of heavy fines.

Non-Compliance Penalties

Non-compliance may result in fines ranging from Rs. 100/- to Rs. 300/- per day till no limit, as well as imprisonment. It may also result in the company and its directors being blacklisted for a period of time.

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